It has come to the attention of the Texas Department of Insurance (“the Department”) that some sellers are demanding that title agents and underwriters issue title insurance in sales transactions which include a future transfer fee covenant. A future transfer fee covenant provides for a seller to receive a fee upon subsequent sales of the insured property.
As with any new product, the Department expects you to take prudent steps to carefully evaluate the risk of coverage and whether your organization has the resources to insure and monitor the status of the covenant’s obligations over time. If you determine to issue the policy but except to such liens, the exception should be accomplished in accordance with Section IV, Procedural Rule 5 (P-5) of the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (“Basic Manual”). Licensees are reminded that general exceptions to coverage are not permitted except by rule. In the absence of such a rule, a specific reference to an instrument must be provided when listing a Schedule B exception pursuant to P-5 of the Basic Manual.
Violation of the Insurance Code or Department rules may subject you to disciplinary action including fine, penalty, license suspension, license revocation and/or other appropriate administrative remedy If you have any questions regarding this Bulletin please contact the Title Division at 512-322-3482 or via email at title@tdi.state.tx.us
Mike Geeslin
Commissioner of Insurance